With effect from April 2017, your personal tax bill should be improving. Here’s what you need to know…
- There will be a tax saving as your personal tax allowance will increase to £11,500, and the basic rate band increases to £33,500. This means you won’t pay the higher rate of tax on any income up to £45,000.
- NIC thresholds have also increased, so there is no NI payable for employer or employee on income up to £8,164.
There are also increases in married couples and blind person’s allowance, should either of these apply to you.
Advance payment of income tax
We want to flag up to you the requirements around payment on account…
If your tax bill is more than £1000 (after PAYE), you will need to make advance payments on 31 January 2018, and an additional instalment on 31 July.
For example, if your tax liability for the tax year 2016-2017 is calculated to be £1500, as well as paying that liability, you will also be required to pay advance payments for the tax year 2018-2019 in two equal instalments. So, your payment on 31 January 2018 would be £2250 (£1500 + £750). HMRC assumes your tax bill for the year 2018-2019 will be the same as the previous year, and any adjustments would be reflected in your payment in January 2019.
This advance payment will also affect you, if you have significant dividend income, as the dividend tax credit was abolished with effect from 6 April 2016. You will now pay tax on your dividend income and so will need to pay advance tax for the year 2018-2019 by 31 January 2018.
Tax free childcare
From later this year, you can open an online account for tax free childcare. For every £8 you pay in the government will pay in an extra £2. Parents can receive up to £2,000 per child, per year, towards their childcare costs, or £4,000 for disabled children.
What you should know:
- The funds can be used to pay for childcare with a registered provider
- You can pay money in at a frequency to suit you
- The scheme is available for children up to the age of 12
- To qualify, you need to be in work – you can be self employed
- You need to earn a minimum of £115 per week, and no more than £100,000 per year
- You can still receive employer supported childcare (for example, childcare vouchers) in addition to this scheme. However, employers will not be able to enrol new employees into their schemes after April 2018.
To find out more, please take a look here: Childcare schemes
ISA annual limit
The ISA annual limit will increase from £15,240 to £20,000 with effect from 6 April 2017. This means you don’t pay any tax on:
- Interest received from cash ISAs
- Income or capital gains on stock/share ISAs or innovative ISAs
If you are eligible to open a junior ISA, you can deposit an additional £4080 for each dependent child.
If you would like to talk through the implications of the above in more detail, or get specific advice for your personal situation, please call us on 01256 406 601.